Current report filing

OPERATING SEGMENTS

v2.4.0.8
OPERATING SEGMENTS
 12 Months Ended
Dec. 31, 2012
Operations, Reportable Information, by Operating Segment  
Segment Reporting Disclosure [Text Block]
OPERATING SEGMENTS
As of December 31, 2012, our organizational structure consisted of the following operating segments: Eurasia and Africa; Europe; Latin America; North America; Pacific; Bottling Investments; and Corporate. Effective January 1, 2013, the Company transferred our India and South West Asia business unit from the Eurasia and Africa operating segment to the Pacific operating segment. Accordingly, all segment information presented herein has been revised to reflect this change in our organizational structure.
Segment Products and Services
The business of our Company is nonalcoholic beverages. Our geographic operating segments (Eurasia and Africa; Europe; Latin America; North America; and Pacific) derive a majority of their revenues from the manufacture and sale of beverage concentrates and syrups and, in some cases, the sale of finished beverages. Our Bottling Investments operating segment is comprised of our Company-owned or consolidated bottling operations, regardless of the geographic location of the bottler, except for bottling operations managed by CCR, which are included in our North America operating segment, and equity income from the majority of our equity method investments. Company-owned or consolidated bottling operations derive the majority of their revenues from the sale of finished beverages. Subsequent to our acquisition of CCE's former North America business on October 2, 2010, our North America operating segment began to derive the majority of its net operating revenues from the sale of finished beverages. Refer to Note 2. Generally, bottling and finished product operations produce higher net revenues but lower gross profit margins compared to concentrate and syrup operations.
The following table sets forth the percentage of total net operating revenues related to concentrate operations and finished product operations:
Year Ended December 31,
2012

 
2011

 
2010

Concentrate operations1
38
%
 
39
%
 
51
%
Finished product operations2,3
62


61

 
49

Net operating revenues
100
%
 
100
%
 
100
%

1 
Includes concentrates sold by the Company to authorized bottling partners for the manufacture of fountain syrups. The bottlers then typically sell the fountain syrups to wholesalers or directly to fountain retailers.
2 
Includes fountain syrups manufactured by the Company, including consolidated bottling operations, and sold to fountain retailers or to authorized fountain wholesalers or bottling partners who resell the fountain syrups to fountain retailers.
3 
Includes net operating revenues related to our acquisition of CCE's former North America business for the full year in 2012 and 2011. In 2010, the percentage includes net operating revenues from the date of the CCE acquisition on October 2, 2010.
Method of Determining Segment Income or Loss
Management evaluates the performance of our operating segments separately to individually monitor the different factors affecting financial performance. Our Company manages income taxes and certain treasury-related items, such as interest income and expense, on a global basis within the Corporate operating segment. We evaluate segment performance based on income or loss before income taxes.
Geographic Data
The following table provides information related to our net operating revenues (in millions):
Year Ended December 31,
2012

 
2011

 
2010

United States
$
19,732

 
$
18,699

 
$
10,629

International
28,285

 
27,843

 
24,490

Net operating revenues
$
48,017

 
$
46,542

 
$
35,119

The following table provides information related to our property, plant and equipment — net (in millions):
Year Ended December 31,
2012

 
2011

 
2010

United States
$
8,509

 
$
8,043

 
$
8,251

International
5,967

 
6,896

 
6,476

Property, plant and equipment — net
$
14,476

 
$
14,939

 
$
14,727


Information about our Company's operations by operating segment for the years ended December 31, 2012, 2011 and 2010, is as follows (in millions):
 
Eurasia &
Africa

 
Europe

 
Latin
America

 
North
America

 
Pacific

 
Bottling
Investments

 
Corporate

 
Eliminations

 
Consolidated

2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net operating revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Third party
$
2,697

 
$
4,481

 
$
4,560

 
$
21,665

 
$
5,680


$
8,807

 
$
127

 
$
—

 
$
48,017

   Intersegment
—

 
642

 
271

 
15

 
628

 
88

 
—

 
(1,644
)
 
—

   Total net revenues
2,697

 
5,123

 
4,831

 
21,680

 
6,308

 
8,895

 
127

 
(1,644
)
 
48,017

Operating income (loss)
1,078

 
2,960

 
2,879

 
2,597

 
2,516

 
140

 
(1,391
)
 
—

 
10,779

Interest income
—

 
—

 
—

 
—

 
—

 
—

 
471

 
—

 
471

Interest expense
—

 
—

 
—

 
—

 
—

 
—

 
397

 
—

 
397

Depreciation and amortization
33

 
100

 
70

 
1,083

 
119

 
406

 
171

 
—

 
1,982

Equity income (loss) — net
20

 
45

 
4

 
13

 
2

 
732

 
3

 
—

 
819

Income (loss) before income taxes
1,101

 
3,015

 
2,882

 
2,624

 
2,523

 
904

 
(1,240
)
 
—

 
11,809

Identifiable operating assets1
1,299

 
2,976

2 
2,759

 
34,114

 
2,163

 
9,648

2 
22,767

 
—

 
75,726

Investments3
1,155

 
271

 
539

 
39

 
127

 
8,253

 
64

 
—

 
10,448

Capital expenditures
51

 
30

 
88

 
1,447

 
107

 
867

 
190

 
—

 
2,780

2011 — As Adjusted
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net operating revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Third party
$
2,590

 
$
4,777

 
$
4,403

 
$
20,559

 
$
5,553

 
$
8,501

 
$
159

 
$
—

 
$
46,542

   Intersegment
—

 
697

 
287

 
12

 
536

 
90

 
—

 
(1,622
)
 
—

   Total net revenues
2,590

 
5,474

 
4,690

 
20,571

 
6,089

 
8,591

 
159

 
(1,622
)
 
46,542

Operating income (loss)
1,003

 
3,090

 
2,815

 
2,319

 
2,239

 
224

 
(1,517
)
 
—

 
10,173

Interest income
—

 
—

 
—

 
—

 
—

 
—

 
483

 
—

 
483

Interest expense
—

 
—

 
—

 
—

 
—

 
—

 
417

 
—

 
417

Depreciation and amortization
30

 
109

 
63

 
1,065

 
115

 
403

 
169

 
—

 
1,954

Equity income (loss) — net
(3
)
 
33

 
20

 
6

 
1

 
646

 
(13
)
 
—

 
690

Income (loss) before income taxes
1,001

 
3,134

 
2,832

 
2,327

 
2,242

 
897

 
(975
)
 
—

 
11,458

Identifiable operating assets1
1,160

 
3,204

2 
2,446

 
33,422

 
2,170

 
8,905

2 
20,293

 
—

 
71,600

Investments3
284

 
243

 
475

 
26

 
133

 
7,140

 
73

 
—

 
8,374

Capital expenditures
50

 
38

 
105

 
1,364

 
128

 
1,039

 
196

 
—

 
2,920

2010 — As Adjusted
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net operating revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Third party
$
2,330

 
$
4,424

 
$
3,880

 
$
11,140

 
$
5,037

 
$
8,216

 
$
92

 
$
—

 
$
35,119

   Intersegment
2

 
825

 
241

 
65

 
458

 
97

 
—

 
(1,688
)
 
—

   Total net revenues
2,332

 
5,249

 
4,121

 
11,205

 
5,495

 
8,313

 
92

 
(1,688
)
 
35,119

Operating income (loss)
914

 
2,976

 
2,405

 
1,520

 
2,114

 
227

 
(1,743
)
 
—

 
8,413

Interest income
—

 
—

 
—

 
—

 
—

 
—

 
317

 
—

 
317

Interest expense
—

 
—

 
—

 
—

 
—

 
—

 
733

 
—

 
733

Depreciation and amortization
25

 
106

 
54

 
575

 
107

 
430

 
146

 
—

 
1,443

Equity income (loss) — net
18

 
33

 
24

 
(4
)
 
1

 
971

 
(18
)
 
—

 
1,025

Income (loss) before income taxes
933

 
3,020

 
2,426

 
1,523

 
2,116

 
1,205

 
2,984

 
—

 
14,207

Identifiable operating assets1
1,192

 
2,724

2 
2,298

 
32,793

 
1,913

 
8,398

2 
16,018

 
—

 
65,336

Investments3
291

 
243

 
379

 
57

 
123

 
6,426

 
66

 
—

 
7,585

Capital expenditures
57

 
33

 
94

 
711

 
103

 
942

 
275

 
—

 
2,215

1 
Principally cash and cash equivalents, short-term investments, marketable securities, trade accounts receivable, inventories, goodwill, trademarks and other intangible assets and property, plant and equipment — net.
2 
Property, plant and equipment — net in Germany represented approximately 10 percent of consolidated property, plant and equipment — net in 2012, 10 percent in 2011 and 10 percent in 2010.
3 
Principally equity method investments, available-for-sale securities and nonmarketable investments in bottling companies.
In 2012, the results of our operating segments were impacted by the following items:
•
Operating income (loss) and income (loss) before income taxes were reduced by $1 million for Europe, $227 million for North America, $3 million for Pacific, $164 million for Bottling Investments and $38 million for Corporate due to charges related to the Company's productivity and reinvestment program as well as other restructuring initiatives. Refer to Note 18.
•
Operating income (loss) and income (loss) before income taxes were increased by $4 million for Europe, $1 million for Pacific and $5 million for Corporate due to the refinement of previously established accruals related to the Company's 2008–2011 productivity initiatives. Refer to Note 18.
•
Operating income (loss) and income (loss) before income taxes were increased by $6 million for North America due to the refinement of previously established accruals related to the Company's integration of CCE's former North America business. Refer to Note 18.
•
Operating income (loss) and income (loss) before income taxes were reduced by $21 million for North America due to costs associated with the Company detecting residues of carbendazim, a fungicide that is not registered in the United States for use on citrus products, in orange juice imported from Brazil for distribution in the United States. As a result, the Company began purchasing additional supplies of Florida orange juice at a higher cost than Brazilian orange juice. Refer to Note 17.
•
Operating income (loss) and income (loss) before income taxes were reduced by $20 million for North America due to changes in the Company's ready-to-drink tea strategy as a result of our current U.S. license agreement with Nestlé terminating at the end of 2012. Refer to Note 17.
•
Equity income (loss) — net and income (loss) before income taxes were increased by $8 million for Bottling Investments due to the Company’s proportionate share of unusual or infrequent items recorded by certain of our equity method investees. Refer to Note 17.
•
Income (loss) before income taxes was increased by $185 million for Corporate due to the gain the Company recognized as a result of the merger of Andina and Polar. Refer to Note 16 and Note 17.
•
Income (loss) before income taxes was reduced by $108 million for Corporate due to the loss the Company recognized on the pending sale of a majority ownership interest in our Philippine bottling operations to Coca-Cola FEMSA which closed in January 2013. As of December 31, 2012, the assets and liabilities associated with our Philippine bottling operations were classified as held for sale in our consolidated balance sheets. Refer to Note 16 and Note 17.
•
Income (loss) before income taxes was increased by $92 million for Corporate due to a gain the Company recognized as a result of Coca-Cola FEMSA issuing additional shares of its own stock during the period at a per share amount greater than the carrying amount of the Company's per share investment. Refer to Note 16 and Note 17.
•
Income (loss) before income taxes was reduced by $82 million for Corporate due to the Company acquiring an ownership interest in Mikuni for which we paid a premium over the publicly traded market price. This premium was expensed on the acquisition date. Subsequent to this transaction, the Company accounts for our investment in Mikuni under the equity method of accounting. Refer to Note 16 and Note 17.
•
Income (loss) before income taxes was reduced by $16 million for Corporate due to other-than-temporary declines in the fair values of certain cost method investments. Refer to Note 16 and Note 17.
•
Income (loss) before income taxes was reduced by $1 million for Eurasia and Africa, $4 million for Europe, $2 million for Latin America and $4 million for Pacific due to changes in the structure of BPW, our 50/50 joint venture with Nestlé in the ready-to-drink tea category. Refer to Note 17.
In 2011, the results of our operating segments were impacted by the following items:
•
Operating income (loss) and income (loss) before income taxes were reduced by $12 million for Eurasia and Africa, $25 million for Europe, $4 million for Latin America, $374 million for North America, $4 million for Pacific, $89 million for Bottling Investments and $164 million for Corporate, primarily due to the Company's ongoing productivity, integration and restructuring initiatives as well as costs associated with the merger of Arca and Contal. Refer to Note 18 for additional information on our productivity, integration and restructuring initiatives. Refer to Note 17 for additional information related to the merger of Arca and Contal.
•
Operating income (loss) and income (loss) before income taxes were reduced by $82 million for Pacific and $2 million for North America due to charges associated with the earthquake and tsunami that devastated northern and eastern Japan on March 11, 2011. Refer to Note 17.
•
Operating income (loss) and income (loss) before income taxes were reduced by $10 million for Corporate due to charges associated with the floods in Thailand that impacted the Company's supply chain operations in the region. Refer to Note 17.
•
Equity income (loss) — net and income (loss) before income taxes were reduced by $53 million for Bottling Investments, primarily attributable to the Company's proportionate share of asset impairments and restructuring charges recorded by certain of our equity method investees. Refer to Note 17.
•
Income (loss) before income taxes was increased by a net $417 million for Corporate, primarily due to the gain the Company recognized as a result of the merger of Arca and Contal. Refer to Note 17.
•
Income (loss) before income taxes was increased by a net $122 million for Corporate, primarily due to gains the Company recognized as a result of Coca-Cola FEMSA issuing additional shares of its own stock during the year at per share amounts greater than the carrying value of the Company's per share investment. These gains were partially offset by charges associated with certain of the Company's equity method investments in Japan. Refer to Note 17.
•
Income (loss) before income taxes was increased by $102 million for Corporate, primarily due to the gain on the sale of our investment in Embonor, a bottling partner with operations primarily in Chile. Prior to this transaction, the Company accounted for our investment in Embonor under the equity method of accounting. Refer to Note 17.
•
Income (loss) before income taxes was reduced by $41 million for Corporate due to the impairment of an investment in an entity accounted for under the equity method of accounting. Refer to Note 16 and Note 17.
•
Income (loss) before income taxes was reduced by $17 million for Corporate due to other-than-temporary impairments of certain available-for-sale securities. Refer to Note 16 and Note 17.
•
Income (loss) before income taxes was reduced by $9 million for Corporate due to the net charge we recognized on the repurchase and/or exchange of certain long-term debt assumed in connection with our acquisition of CCE's former North America business as well as the early extinguishment of certain other long-term debt. Refer to Note 10.
•
Income (loss) before income taxes was reduced by $5 million for Corporate due to the finalization of working capital adjustments related to the sale of our Norwegian and Swedish bottling operations to New CCE. Refer to Note 2 and Note 17.
In 2010, the results of our operating segments were impacted by the following items:
•
Operating income (loss) and income (loss) before income taxes were reduced by $7 million for Eurasia and Africa, $50 million for Europe, $133 million for North America, $22 million for Pacific, $122 million for Bottling Investments and $485 million for Corporate, primarily due to the Company's ongoing productivity, integration and restructuring initiatives; charitable donations; transaction costs incurred in connection with our acquisition of CCE's former North America business and the sale of our Norwegian and Swedish bottling operations to New CCE; and other charges related to bottling activities in Eurasia. Refer to Note 17.
•
Operating income (loss) and income (loss) before income taxes were reduced by $74 million for North America due to the acceleration of expense associated with certain share-based replacement awards issued in connection with our acquisition of CCE's former North America business. Refer to Note 12.
•
Equity income (loss) — net and income (loss) before income taxes were reduced by $66 million for Bottling Investments. This net charge was primarily attributable to the Company's proportionate share of unusual tax charges, asset impairments, restructuring charges and transaction costs recorded by equity method investees, which were partially offset by our proportionate share of a foreign currency remeasurement gain recorded by an equity method investee. The components of the net charge were individually insignificant. Refer to Note 17.
•
Income (loss) before income taxes was reduced by $23 million for Bottling Investments and $25 million for Corporate due to other-than-temporary impairments and a donation of preferred shares in one of our equity method investees. Refer to Note 17.
•
Income (loss) before income taxes was increased by $4,978 million for Corporate due to the remeasurement of our equity investment in CCE to fair value upon the close of the transaction. Refer to Note 2.
•
Income (loss) before income taxes was increased by $597 million for Corporate due to the gain on the sale of our Norwegian and Swedish bottling operations to New CCE. Refer to Note 2.
•
Income (loss) before income taxes was reduced by $342 million for Corporate related to the premiums paid to repurchase the long-term debt and the costs associated with the settlement of treasury rate locks issued in connection with the debt tender offer. Refer to Note 10.
•
Income (loss) before income taxes was reduced by $265 million for Corporate due to charges related to preexisting relationships with CCE. These charges primarily related to the write-off of our investment in infrastructure programs with CCE. Refer to Note 2.
•
Income (loss) before income taxes was reduced by $103 million for Corporate due to the remeasurement of our Venezuelan subsidiary's net assets. Refer to Note 1.
•
Income (loss) before income taxes was increased by $23 million for Corporate due to the gain on the sale of 50 percent of our investment in Leão Junior. Refer to Note 17.